5 Questions to ask yourself before investing

1 – How much cash do you have?

 Real estate investing is just that, an investment. You need some cash reserved for any aspect or niche in real estate. If you have little cash to start off with you can try your hand in wholesaling. More specifically you can bird dog (search out deals) for established wholesalers that know the process. This niche of investing still requires you to save up a little sum so that you can put in an earnest money deposit ($500-$2000) to place a deal under contract. If you want to make a decent living, make sure to have a couple times that amount so that you can put a number of lucrative deals under contract. If you are rehabbing a home, what happens when it takes an extra month to sell your property or a hurricane rolls through a nearby town and makes building materials a little more expensive than planned due to supplies moving up to repair damaged homes? These little bumps in the road take some cash reserve, some just in case money. Ask yourself, how much cash do I have, and how much can I save to keep me safe just in case.

 

2--  What is your tolerance for risk?

 

Capital and risk are inseparable partners. A person with five million in the bank can absorb a risk of five hundred thousand without serious, though maybe painful, consequences. Someone who is putting up their hard earned five thousand, hoping to turn it into fifty, is in a different situation. I'm not suggesting the one with five should stay home and watch television. Taking risks is admirable and exciting. But you should estimate realistically how much actual money you can put into an investment. The mirror half of that is to be honest with yourself and think about how much risk you can live with emotionally. Some people are natural adventurers, others prefer a cautious approach.

 

3—What are your long-term goals?

 

Some individuals are interested in capital preservation, others want maximum return in the shortest period. Each carries a level of risk, and also a time commitment. Each demands a particular level of investment of time and money. If you're looking for a ten percent profit on your investment in a matter of weeks, real estate isn't for you. If you are after high percentage gains, that is possible but risky and usually requires a year or more commitment. During that year, your investments are not liquid. Are you looking to build equity and appreciation in rental homes slowly and retire years down the line or are you thinking short term, just desiring a yearly income and still putting together your long term plan?

 

 

 

 

4—What kind of person are you?

 

Real estate investment, unless you just enjoy losing money and enduring stress, requires a tolerance for risk, a commitment of time and effort, and an interest in details — especially legal details. Beyond all that, the more basic requirement is an interest and aptitude for learning. Market study, advertising, contracts, construction, property law, and even a fair amount of psychology, all form a part of real estate investing. You don't have to become an expert in these, and other, areas before making a move. But if you don't enjoy learning about these and the host of other subjects that are part of the business — well, this just isn’t something you will enjoy.

If you still haven't been scared away — bravo!  You stand to make a lot of money in one of the oldest businesses and biggest adventures still around in the modern world.

5—Who Is Mentoring you and keeping you accountable?

So many people read, learn, pay money, go to conferences, pay more money, go to more conferences, but don’t start. Why? They don’t have a mentor or other real estate professional or group to hold them accountable. Find a mentor. Find a successful and senior investor, many love to share their knowledge. They will answer your questions. Join a REIA group and go to smaller focus group meetings. These groups will give you an outlet to talk about your deals and people who will look forward to hearing about your progress. This will motivate you. Do it.